Smallholder agriculture in Ethiopia is highly vulnerable to the impacts of climate change and variability. Smallholder farmers in the Gamo Highlands of Ethiopia are also facing high levels of land fragmentation. Fragmentation has production costs and benefits, while many papers have investigated the cost side of fragmentation, while its benefits have been largely ignored. For this, the main objective of this thesis is to explain how fragmentation and sustainable land management practices influence the outcomes of sustainable adaptation. To explain this, mixed method that focuses on quantitative analysis was used. The results indicate that the effect of fragmentation on the use of sustainable land management practices was mostly positive. Moreover, fragmentation and land management practices affected food security, technical efficiency and differently affected the work hours of men and women. To optimize costs and benefits of fragmentation to sustainable adaptation, we suggest voluntary assembling of scattered plots into relatively larger heterogeneous plots.